Kiwi extends rally into uncharted TWI territory as yen keeps weakening

The New Zealand dollar was propelled to fresh highs on a trade-weighted basis as the Bank of Japan's massive easing programme continues to weaken the yen.

The trade-weighted index rose as high as 78.30, and traded at 78.25 at 5pm in Wellington from 77.72 yesterday. The kiwi climbed to 84.31 yen, touching a five-year high 84.49, from 82.98 yen yesterday.

The yen declined to 99.66 against the US dollar, its weakest since May 2009, and recently traded at 99.30 after the Bank of Japan yesterday offered to buy one trillion yen of bonds maturing in five to 10 years and 200 billion yen of bonds maturing in more than 10 years.

That is the first step it has taken since new governor Haruhiko Kuroda unveiled plans to double monthly purchases to 7.5 trillion yen.

"If you think the yen is the main culprit for the latest nudge higher [on the TWI], who's going to win, the RBNZ or the Bank of Japan when it comes to easing aggressively?" asks Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "There's very little they can do about the yen at the moment."

The kiwi rose to a two-month high against the greenback, trading at 84.88 US cents from 84.20 cents yesterday, with New Zealand government bonds offering higher yields attracting interest among investors amid speculation they may be included in a global index, and ahead of major maturities next month.

New Zealand property values rose at their fastest annual pace since 2008 in the year ended March 31, according to government owned research agency Quotable Value. The quarterly pace slowed to 1.3 percent and comes a day after central bank deputy governor Grant Spencer warned an excessively hot housing market could prompt an interest rate response.

Local firms' confidence rose to its strongest level since before the 2008 global financial crisis and showed the economic recovery is showing up beyond the main centres of Christchurch and Auckland, according to the New Zealand Institute of Economic Research's quarterly survey of business opinion.

Investors are awaiting Chinese trade figures tomorrow to get an update on the health of the world's second biggest economy and major trading partner with Australia and New Zealand.

The kiwi rose to 65.05 euro cents from 64.83 cents yesterday and gained to 55.59 British pence from 54.93 pence. It increased to 81.34 Australian cents from 81.19 cents.

(BusinessDesk)